The man who started the “net neutrality” war to run GM

Ed Whitacre, the one-time AT&T head who sparked the network neutrality debate …

What does former AT&T boss Ed "not gonna use my pipes for free" Whitacre know about cars?

"I don’t know anything about cars," he told Bloomberg yesterday. "A business is a business, and I think I can learn about cars. I’m not that old, and I think the business principles are the same."

Despite that drawback, Whitacre has been appointed the new boss of General Motors. For the company's sake, let's hope that "Big Ed" doesn't set off another political firestorm like he did at his last job, where he single-handedly kickstarted the US war over network neutrality.

Back in 2005, Whitacre was asked about companies like Google and whether they posed any threat to AT&T. He said, "How do you think they're going to get to customers? Through a broadband pipe. Cable companies have them. We have them. Now what they would like to do is use my pipes free, but I ain't going to let them do that because we have spent this capital and we have to have a return on it. So there's going to have to be some mechanism for these people who use these pipes to pay for the portion they're using. Why should they be allowed to use my pipes?"

It was breathtakingly arrant nonsense, as every consumer and business that pays its monthly Internet service bill knows full well, but it boiled down to a simple creed: we will squeeze money from any resource that we control and that you need, logic and fairness be damned. Of course, after a public outcry and the passing of the FCC's four "Internet freedoms," AT&T didn't try to block websites or charge them more for access.

At GM, Whitacre won't even be in the position of making such threats. GM's products aren't particularly desirable at the moment, and there's plenty of competition in carmaking. One imagines that if there weren't, however, Big Ed might push a leasing model in which customers make monthly payments, get a vehicle that drives about half the speed of the rest of the developed world, and face additional fees for having the gall to drive to popular destinations.

Originally posted by xelitus:Way to go Obama. What a great choice for running the "all new" Government Motors!

it's appeasement to all the people who wanted us to let GM die, now he gets to appease both groups ("we helped!" and "let die") while failing both groups ("GM didn't survive" and "we blew taxpayer money"). Win/win AND lose/lose. Genius!

I look forward to governors on cars limiting their speed based on how much you pay.

"Oh, well the basic model tops out at 35 MPH. But for just $5K more you can get an upgrade to 50 MPH. Our "Fastest" Tier costs $30K more but you can top out at 110 MPH. Although at that speed you can only use your 1 tank of gas per month in 3 days of average driving".

Wow! Cantankerous old fart isn't he. That type of greedy attitude is the reason why we have such a messed up economy now. My pipes? Oh come on you stupid sob, theyv'e been paid for a dozen times over or more already. And what about all that money years ago, and those concessions from the government, for AT&T and the rest of the telcos (primarily AT&T) to build that grand 'information super highway' with those pipes? Those very pipes AT&T guranteed for that money but never delivered on? Those very pipes AT&T has kept to their selfs and made money off all these years? Your pipes? I think not...they are the tax payers pipes and we paid for them years ago. Not only is he a very bitter and greedy old man, he obviously has a very short 'institutional' memory as well. Maybe the on set of alzheimers or something.

If the leadership only cares about customer exploitation, not the product or trying to make the world better, the company will never be great. At best, it will have its ups and downs as a mediocre player in the market, and when it eventually dies, no one but stockbrokers will miss it. I guess he's content to trade a soul for more wealth.

Originally posted by Shades047:That quote alone is symbolic of everything that is wrong with asshole MBA types- they really think you just have to know "business" and you can run any company!

I can't agree more. I remain completely unconvinced of the validity of almost any degree in the field of business. At best the field of accounting could be construed as a technical degree (like an Engineering Tech credential).

Outside of that the breakdown seems to be:

Marketing == Can't hack it in Sociology or Psychology

Finance == Can't hack it in Economics or Mathematics

MIS == Can't hack it in Computer Science or Engineering

Management == Can't hack it in Political Science or Linguistics

The general point is that, in so far as I have been able to surmise, Business School is a myriad of watered-down curriculums that are superficially interdisciplinary, and offered as a means for utterly uninspired people to get an inflated income without having to really know much of anything about much of anything. This should be immediately evident when you look at the course work discrepancies (Business Stats vs. Engineering Stats is a prime example).

I too think the world is patently unfair when I get paid probably 1% of what Whitacre makes, and yet I'm capable of speaking and writing without unprofessional slang. I ain't [sic] expecting that to change, though.

Great job of distilling this mans life and skills down to one comment. Yes, it was one unfathomably stupid comment, that simultaneously made customers aware of possibilities that he didn't want them to be aware of and set off a counter-push against something he hadn't even started to do yet.

But one really, really stupid comment isn't a life. You don't know if this comment is his entire outlook on running a business, or simply the ramblings of a man desperate to find a way to get money for his company. And if you don't think the head of <insert favorite company here> hasn't considered something like what he said at some point, then you're hopelessly naive.

I'm not saying that this was a great pick; I'm sure there are people out there who haven't accidentally sparked opposition to their own subversive plot. But one comment does not mean he's incapable of doing the job.

I can see where you get that from. I studied ME for two years before switching to Finance. I couldn't hack thermodynamics. Math however was a strong point. I aced my fourth level science/engineering track math class. I loved physics too. I'm a big picture person and corporate finance fits me well. What can I say?

However on the flip side, I can tell you that most engineers haven't a damn clue how to run a business. A few do, and those are the people that go far. Likewise, most bean counters don't know engineering at all. Accounting/Finance people that get the engineering side of things do well too.

It's all about working together to advance the company. If that doesn't happen then good luck getting a steady paycheck, much less annual increases. I mean, that's why most people work. Otherwise we'd all be skiing, surfing, sitting on a beach all day, etc...which would be nice.

Given your statement: what do you suggest someone like me do if pursuing an applied degree in physics, mathematics or psychology is not within my repertoire, (e.g. no grasp of Newton-Meters)?

You mean to say then, that if I do indeed pursue this MBA degree, success shouldn't be allowed and financially rewarded because such work benefits no one... or perhaps that such work should be classified along the same lines of a secondary-school degree? Or perhaps that I should not be allowed to pursue further, "watered-down" education?

The problem with what you write is that it implicitly undervalues, in your estimation, study that does not meet your qualification as 'valid'. If none of it is valid, then those persons who study, have studied and intend to study these superficially interdisciplinary topics are generally not valid in society.

This is grossly wrong. Often times, you do have the correlations with the undergrad correct, but a PhD in sociology won't pay the bills. An MBA in marketing will. There are plenty of brilliant MBAs who could "hack it" in the fields you describe, but go to business school to get specific knowledge about how to run a part of a company.

Even in engineering, a relatively well paying field, there are incentives. A good salary for an engineer is $150,000 a year. That's about as high as it goes unless you have equity. A *starting* salary for an MBA out of a top-tier school is $200,000 a year, plus signing bonuses and benefits packages which are head and shoulders above rank-and-file employees.

Companies pay this because the quality of your management talent often determines the profitability of the company. Good management will keep your company in the black; it doesn't matter how good or bad your engineers are.

My assessment is upon graduation one cannot say for certain what it is that a business student has learned, nor what they can contribute with any certainty to any enterprise, and definitely not something which is distinctly reproducible as a result of that education.

There are plenty of things one can learn about how to run a business, and how to manage people, and how to track money, etc. The problem is that those elements could, and perhaps should, be rolled into stronger disciplines of study for which they relate. Elective focus in Sociology being Marketing; as one is absolutely the superset of the other, merely an application of the former to the latter, etc.

As it stands now the three Business Schools with which I'm most familiar, and for which I have no reason to believe are statistically perverse in this regard, promote the inverse of what Arty50 noted. Primarily that they're systems which produce people typically wholly incapable of fundamentally understanding the functions of the enterprises which they're eagerly pursuing dominion over, specifically because all they've been prepared with is an incomplete subset knowledge-base of some larger superset which provides the necessary context for what they think they know. Fundamentally this wouldn't be a problem if these people weren't actually in-charge of anything, but the opposite is true. They functionally know the least, and yet they're responsible for the most.

I'm not saying that there are no legitimate forms of education regarding the functions of commerce in our society; simply that the legitimacy that's given to education in "Business" as it's own discipline, and the inflated career paths available to it don't remotely match its measurable utility.

This is grossly wrong. Often times, you do have the correlations with the undergrad correct, but a PhD in sociology won't pay the bills. An MBA in marketing will. There are plenty of brilliant MBAs who could "hack it" in the fields you describe, but go to business school to get specific knowledge about how to run a part of a company.

Even in engineering, a relatively well paying field, there are incentives. A good salary for an engineer is $150,000 a year. That's about as high as it goes unless you have equity. A *starting* salary for an MBA out of a top-tier school is $200,000 a year, plus signing bonuses and benefits packages which are head and shoulders above rank-and-file employees.

Companies pay this because the quality of your management talent often determines the profitability of the company. Good management will keep your company in the black; it doesn't matter how good or bad your engineers are.

You're making my point for me. First, that the fact that a PhD in sociology won't pay the bills is a problem of its own right. Second, that an MBA in marketing will. Lastly, that education in business is most usefully applied as auxiliary education.

The only way the existing mechanism makes any sense is if you truly believe that "business" is wholly extricable from its associated enterprise. In which case there should be no consternation at all over Ed Whitacre's comment that he knows nothing about cars, because he'd be absolutely correct. That whatever it is he knows about "business" applies without variation to any enterprise at all with equal likelihood of success.

A claim which should be absurd on its face, and a claim that is prerequisite for "business" to stand alone as a discipline of study.

Originally posted by Alfonse:You don't know if this comment is his entire outlook on running a business, or simply the ramblings of a man desperate to find a way to get money for his company. And if you don't think the head of <insert favorite company here> hasn't considered something like what he said at some point, then you're hopelessly naive.

It didn't sound as if it were a passing thought or a possibility, it sounded as if he believed this truly was the path to take. The fact he lacks the mental maturity to say this in a diplomatic manner (or not say it at all) makes him all the more suspect. One would expect a man with this salary and responibility to NOT bring a firestorm of controversy upon his company. Most CEOs manage to avoid this.

Most CEOs are generally really good at selling their services and justifying a high price tag. They excel at negotiating their own pay, bonus, and severance packages. They specialize in methods of shifting income so as to pay less taxes and structuring contracts to survive bankruptcy and litigation. As to actually running a company, who cares? A really good CEO ensures that their bonuses and severance aren't tied to specific goals.

I don’t know anything about cars. A business is a business, and I think I can learn about cars. I’m not that old, and I think the business principles are the same.

This is similar to the old canard about how a good salesman can sell any kind of product without knowing much about them. Those kinds of salesmen are the kind people typically associate with used cars and Best Buy employees.

A truly good salesman knows he has to know and understand both the product and its consumer well enough to be effective. I would expect a truly good CEO to know he needs a good understand of business principles as well as knowledge of the kind of business and its associated products a company is responsible for. Whitacre's statement quoted above suggests he knows that, but his glaring gaffe about AT&T's "pipes" suggests he isn't so good at gaining the knowledge he needs most.

Originally posted by naschbac:The only way the existing mechanism makes any sense is if you truly believe that "business" is wholly extricable from its associated enterprise. In which case there should be no consternation at all over Ed Whitacre's comment that he knows nothing about cars, because he'd be absolutely correct. That whatever it is he knows about "business" applies without variation to any enterprise at all with equal likelihood of success.

A claim which should be absurd on its face, and a claim that is prerequisite for "business" to stand alone as a discipline of study.

++

Business school is where you make the connections that get you the paycheck; How to run a business is something you learn on the job.

Most of the finest businessmen and women that I have known, never went anywhere near business school. Of course, they generally run small businesses. They still make good (but not obscene) money, even though their compensation is invariably tied directly to their performance in the long run.

Originally posted by Exelius:Companies pay this because the quality of your management talent often determines the profitability of the company. Good management will keep your company in the black; it doesn't matter how good or bad your engineers are.

Nope. Eventually people spot the trends of which companies make the bad products and which companies make the good products (case in point: the rise to prominence of Japanese automakers), and that's part management—knowing which projects to keep and which to kill—but also a huge part engineering. Good management alone won't make up for bad engineering; Whitacre's comment makes it seem like he doesn't realize this, which would mean we probably won't see a big turnaround in the desirability and quality of GM's vehicles.

If he doesn't know anything about cars he's got a whole lot to learn before he can make the necessary changes so that GM will start making better cars.

Naschbach, I really don't think you have an understanding of how a lot of schools encourage their business students to approach their education. I can say this because I am a business student (undergraduate level). Generally speaking, most business majors that I know (multiple schools, though none are Ivy Leaguers) are pursuing a business degree as a way to get ahead in a field in which they are minoring or at least have previous work experience and interests. A business degree is pretty much a general purpose degree, and each individual must make that degree useful to them.

Of course, there are some schools that offer specialized business degrees that focus on a certain business type or industry. One of the schools (and one which I am hoping to transfer to) is the University of Central Florida. Their Hospitality Management program is one of the best in the nation, and they have several concentrations within the major. It is obviously a much more focused management degree than a general management degree and meant for someone who knows that they want to be in that specific business.

So yes, while you are right that a business degree is really a bit of a general degree, your degradation of the degree and of the student earning it are grossly misplaced. A well-rounded business student will have a solid understanding of the basic principals of whatever specific industry they want to go into. I would not expect to be able to have a business degree and be able to successfully run a tech company without at least some college training in computer science, even though I have some serious interests in technology.

Originally posted by Shades047:That quote alone is symbolic of everything that is wrong with asshole MBA types- they really think you just have to know "business" and you can run any company!

...This is hilariously ironic because Ed Whitacre graduated from Texas Tech University with an MS in Industrial Engineering (Tech has a terrible business school but a very good Engineering school). Good try, though. Stereotypes go both ways!

I hope that fucker isn't planning to send his stink buckets out on my new roads!

quote:

Traddy says:"How do you think they're going to get to the gas pumps? Through a broadband road. Arkansas has roads. We have them. Now what they would like to do is use our roads free, but I ain't going to let them do that because we have spent this capital and we have to have a return on it. So there's going to have to be some mechanism for these GM people who use these roads to pay for the portion they're using, plus the portion they borrowed so the company wasn't buried in some cornfield in Arizona. Why should they be allowed to use my roads that I have paid for all my life?"

I just realized that the only long-term hope for GM, namely the Volt and its future versions, is in serious jeopardy with Whitacre at the helm. Electric cars will need a high degree of sales finesse to overcome the initial growing pains of their platform, which is exactly what Whitacre lacks.

Imagine, as a thought experiment, that Steve Jobs became the new CEO of GM. Whether you love him or hate him, there's no denying that he would shake things up and reinvent the company. Now leave that experiment and ponder reality...

The only way the existing mechanism makes any sense is if you truly believe that "business" is wholly extricable from its associated enterprise. In which case there should be no consternation at all over Ed Whitacre's comment that he knows nothing about cars, because he'd be absolutely correct. That whatever it is he knows about "business" applies without variation to any enterprise at all with equal likelihood of success.

A claim which should be absurd on its face, and a claim that is prerequisite for "business" to stand alone as a discipline of study.

While it's certainly true that businesses in different markets are run differently, they tend to share similar qualities. There are basic issues of management of a business that can be learned separate from the particulars of a specific market:

1: Understand the customer.

2: Understand what the customer wants.

3: Understand what you want the customer to want.

4: Convince the customer that what you're offering is what they want.

5: Charge as much for it as the customer can stand to pay.

6: Don't spend more money to make your product than the customer spends on it.

Things like that.

quote:

Good management alone won't make up for bad engineering

Perhaps, but bad management will kill your company faster than bad engineering. Good engineering can't make up for bad management. Mediocre engineering can be just fine with good management, but the opposite is not true.

Originally posted by Alfonse:Perhaps, but bad management will kill your company faster than bad engineering. Good engineering can't make up for bad management. Mediocre engineering can be just fine with good management, but the opposite is not true.

So true. There is NOTHING worse than bad management.

A horrible engineer can and will get fired by a great management. A horrible manager is much harder to fire, and their managing style affects those they manage.

The amazing this about this is the total disregard for the shareholders who invested in the company, the customers who paid their bills every month, and the massive government handouts to build out broadband which were used to put ma bell back together and he still walked away with about 156 million at the end of the trip.

Companies pay this because the quality of your management talent often determines the profitability of the company. Good management will keep your company in the black; it doesn't matter how good or bad your engineers are.

<sarcasm>Right</sarcasm>

In theory, good management is worth a lot of money because strategic mistakes can drive a company into a hole. But I completely dispute that this is why business people are paid more. They are paid more because business people make the compensation decisions so they pay themselves more! Also, "it doesn't matter how good or bad your engineers are"? Are you serious? No wonder this country is going into the crapper!

Your whole orientation of an education being worth only what you can earn makes your biases obvious. Take a look at one professor's experience with so-called higher education: <url=http://www.de.ufpe.br/~toom/articles/engeduc/ARUSSIAN.PDF>A Russian Teacher in America</url> Business majors exhibit the worst of the behaviors illustrated in this paper. This reinforces what naschbac has said. Essentially, they are like parrot's that can spew some facts and execute some procedures like trained monkeys, but are basically not educated people.

Finally, most business people have poor analytical skills and drastically overestimate their ability to make good decisions intuitively. Decision science has a term for this, which I cannot remember at the moment. As far as Whitacre having an engineering degree, that means nothing to me. I know CS graduates from MIT I wouldn't trust to develop trivial systems. See article above about education in the U.S.

Originally posted by Shades047:That quote alone is symbolic of everything that is wrong with asshole MBA types- they really think you just have to know "business" and you can run any company!

...This is hilariously ironic because Ed Whitacre graduated from Texas Tech University with an MS in Industrial Engineering (Tech has a terrible business school but a very good Engineering school). Good try, though. Stereotypes go both ways!

Industrial engineering is somewhere below architectural engineering. Industrial engineers basically program tools. It also has nothing at all to do with phone networks (what AT&T supposedly does), which Ed did for several decades. Anything he learned in school back then about engineering will be worthless now, beyond a few first principles, if he can even recall them. Also, you overestimate Tech's engineering college. There is nothing in that guy's CV that makes me think he can make any of the sweeping changes needed by GM, and his comments go a long way to confirming that belief. Thanks for playing, though.

Sure good management is important. It's just not clear that an MBA makes for (or contributes to) a good manager. It's also not that clear that good managers get rewarded or raised to positions of power.

The belief that business schools promote slash and burn capitalism and self promotion before competence is hardly new or radical.

Originally posted by coslie:Sure good management is important. It's just not clear that an MBA makes for (or contributes to) a good manager. It's also not that clear that good managers get rewarded or raised to positions of power.

The belief that business schools promote slash and burn capitalism and self promotion before competence is hardly new or radical.

Even in engineering, a relatively well paying field, there are incentives. A good salary for an engineer is $150,000 a year. That's about as high as it goes unless you have equity. A *starting* salary for an MBA out of a top-tier school is $200,000 a year, plus signing bonuses and benefits packages which are head and shoulders above rank-and-file employees.

Companies pay this because the quality of your management talent often determines the profitability of the company. Good management will keep your company in the black; it doesn't matter how good or bad your engineers are.

WRONG: Look at http://www.admissionsconsultan...mba/compensation.aspThe average salary for business school grads in the 2008 US News top 15 was a bit less than $125K. I bet it'll be a whole lot less for 2009 and 2010 with the loss of investment banking jobs. ---Companies unfortunately pay bad quality managers highly too. Good managers are quite rare. I'd say that good quality managers are even more rare than good quality engineers because MBA material is based more on hearsay than science. The degree doesn't really train people to manage.

Perhaps, but bad management will kill your company faster than bad engineering. Good engineering can't make up for bad management. Mediocre engineering can be just fine with good management, but the opposite is not true.

Still, I'd suspect that a company in GM's position is going to need more than just mediocre engineering. They lost buyers because of a continued failure to make competitive, quality cars; they're only going to win those buyers back by turning that around. They need management that understands what it takes to make a good car. An IE should be well suited for this, at least in the process management area; on the other hand, it's a different side of the field than what I'd imagine he was involved in at AT&T, and the "all business is the same" sort of attitude is troubling. A key thing when it comes to any engineering is that different sorts of problems require different approaches.